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Deirdre McCloskey, Gregory Clark, and Matt Ridley debate the cause(s) of the industrial revolution. McCloskey writes,


contrary to the usual declarations of the economists since Adam Smith or Karl Marx, the Biggest Economic Story was not caused by trade or investment or exploitation. It was caused by ideas. The idea of bourgeois dignity and liberty led to a rise of real income per head in 2010 prices from about $3 a day in 1800 worldwide to over $100 in places that have accepted the Bourgeois Deal and its creative destruction.


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COMMENTS (12 to date)
david writes:

I suspect technological development had a hand in there at some point.

Bob Layson writes:

I fully welcome the social phenomenon called 'creative destruction' but, although it may please the chest beating CEO boosting Randians, I have always disliked the expression as it provides rhetorical ammunition to the anti-marketeers of all parties.

The whole contrast between between war and commerce is that commercial innovation displaces ideas, methods, forms of employment and investment but it destroys nothing. People choose to abandon former ways of making a living and living their lives but the only loss, to that minority who suffer it, is to the market value of some capital plant and some specialist labour. Yet even then employment awaits in newer and, on average, more productive enterprises. It is true that some capital is not worth scrapping but not to be worth bothering with is hardly to suffer 'destruction'.

fundamentalist writes:

One can't understand the industrial revolution unless one knows the history of the Dutch Republic. As Jonathan Israel (The Dutch Republic) and Jan de Vries (First Modern Nation) point out, the "industrial revolution" began in the Dutch Republic and spread to England. It began in the Dutch Republic because the Dutch were the first in modern history to protect private property (see Angus Maddison).

New Institutional economics plays a role here, too. The industrial revolution was the child of the switch from a traditional, closed society to a modern, open society and the Dutch made the transition first.

Before the Dutch Republic, anyone with savings hid their savings from the nobility who were likely to steal it. The nobility never saved anything but saw their role as conspicuous consumption. Wealthy merchants would give part of their wealth to the church to buy their way into heaven and use the rest to buy land and a title of nobility so they could protect it.

The Dutch made everyone's property secure so that wealthy merchants could invest in production. The first mass production happened in windmill powered factories. The English adopted Dutch methods and improved on them with the steam engine. The English got the full dose of Dutch methods with the "Glorious" Revolution of 1688 when the Dutch William of Orange made himself king and began changing English institutions.

But nothing happens if property is not secure.

fundamentalist writes:

I think McCloskey is very close to the truth. She recognizes that the change began first in the Netherlands (Dutch Republic) and that it was associated with a change in values. But why did the values change, and why did the Dutch adopt an open society (in Douglass's terms)?

The answer was that it was an accident. Read Jonathan Israel's history of the Dutch. The Dutch wanted desperately to continue with a traditional, closed European society. They offered the rule of their country first to a French prince and then the Queen of England. Both refused because of fear of Spain. The Dutch were very afraid of having a nation without a king, but circumstances forced them into it. Finding themselves in uncharted territory, they began to tinker with all of the institutions of the state. Above all, the Dutch were devout Christians. They considered themselves to be the new Israel. They began to apply the teachings of the Late Scholastics as handed down to them by Lessius. Scholastic teaching emphasized the sanctity of private property and the equality of all men before God and therefore before the state. Free markets were nothing more than the instantiation of property rights. So Weber was partially right. The change in values came from Christianity.

Ridley and Clark miss the mark in several ways, but most importantly they need to explain why the backward and poor Europeans outran the far more advanced and wealthy Ottomans and Chinese. Both the Ottomans and Chinese had the advantages that Ridley and Clark claim sparked the IR, and more. So why did it begin in the Dutch Republic and not in the Ottoman Empire or China?

Rebecca Burlingame writes:

There seems to be a chicken-or-the-egg aspect to ideas and the structural changes in which they revolve (and evolve): which came first? However, both are certainly self-reinforcing.

Fundamentalist, your brief history of the Dutch was most helpful.

PKSully writes:

I found this while trying to learn more about the Dutch Republic. There's something wrong about a tax payer subsidized summer vacation masquerading as a seminar on the birth of capitalism. http://www1.umassd.edu/euro/prospectus/prospectus-full.doc Why won't somebody pay me $3,800 to go to the UK and the Netherlands for holiday?

Douglass Holmes writes:

Technological innovation will not suffice to change anything if the culture does not allow its members the freedom to choose the new products. During times of war, an advantage may go to the side that successfully deploys a new technology for fighting, but technological development in commerce requires a certain amount of freedom.

ziel writes:

I suspect technological development had a hand in there at some point.

No, that's the surprising thing. The first steam engines were quite primitive and well within the capabilities of earlier civilizations. These weren't the pressurized steam devices that drove locomotives, but were driven by the vacuum created by the cooling of steam inside a sealed container. Read about Watt's work on improving the steam engine to see how prosaic were his efforts.

As Greg Clark points out, there was something else going on that had a large segment of the population - a critical mass - willing to work really hard at making commercial endeavors more productive.

ajb writes:

Clark wants that critical mass willing to work hard to derive from genetics and better reproducing capitalists in Britain. But in a Farewell to Alms, he really doesn't deal well with the puzzle of China which had every reason to be first. Even his claims that China had a weaker transmission of upper class values runs aground on the longer period of Chinese stability and the fact that -- having a vastly larger population -- there were easily enough upper "quality" individuals in China to make for two or three Englands at the least.

Cassander writes:

Ziel> I think David would agree that technological development was a necessary but not sufficient condition for the industrial revolution. A certain level of development in a wide variety of fields such as ship building, metalworking, farming all contributed to the industrial revolution not running up against the Malthusian wall.

fundamentalist writes:

Considering that the ancient Greeks used hydraulics and steam power, and the Chinese and Ottomans had many of the tech toys that feature in the IR, tech certainly isn't the answer.

ajb:

Clark wants that critical mass willing to work hard to derive from genetics and better reproducing capitalists in Britain.

Yes, but did the Chinese and Ottoman's not have genetics working for them? That's why I insist that the solution to the puzzle must involve some advantage for the Dutch and English that the Chinese and Ottoman's didn't have in the 17th and 18th centuries, because both were wealthier and more tech advanced at the time than was Europe.

Tracy W writes:

I was quite disappointed by McCloskey's article. She spends a lot of time asserting that ideas caused the industrial revolution, but she doesn't produce any supporting evidence, or any reason for rejecting alternative, materialistic views beyond her say-so. So lots of empty rhetoric there. I found Ridley's article much more impressive.

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